Edited version of private advice

Authorisation Number: 1051974545657

Date of advice: 28 April 2022

Ruling

Subject: Small business concessions - 50% active asset reduction - retirement exemption

Question 1

Do you satisfy the conditions for the small business 50% active asset reduction pursuant to section 152-200 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the sale of the property?

Answer

Yes, based on the information provided you satisfy the basics conditions under section 152-10 of the ITAA 1997. You have sold a capital gains tax (CGT) asset and will make a capital gain. You do not carry on a business, but your CGT asset, the property, has been used in a business carried on by your affiliate. As such you satisfy sub-paragraph 152-10(1)(c)(iv) of the ITAA 1997.

You have held the property for less than 15 years and the property was used in the course of carrying on a business by your affiliates for a total of at least half of the period of ownership. The property therefore satisfies the active asset test in section 152-35 of the ITTA 1997, satisfying the condition under paragraph 152-10(1)(d) of the ITAA 1997. Accordingly, you are eligible to apply the 50% active asset reduction to the sale of the property. Further information can be found by searching for 'QC 52289' on the ATO website.

Question 2

Are you eligible to apply the small business retirement exemption to any capital gain made on the sale of the property under section 152-300 of the ITAA 1997?

Answer

Yes. As you satisfy the basic conditions and were over 55 years of age at the time of the CGT event there is no requirement to pay any amount to a complying super fund or RSA. You are eligible to reduce the gain by applying the small business retirement exemption up to your lifetime limit of $500,000. Further information can be found by searching for 'QC 52290' on the ATO website.

This ruling applies for the following period:

30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You inherited a property from your father 's estate in XXXX 20XX.

You had full time employment.

You have experience in the primary production business from growing up on the farm and helping out after school, weekends and on holidays.

A family member carried on a primary production business on the property from XXX 20XX to XXX 20XX.

You continued to assist with the business during weekends and over the long summer breaks.

Another family member carried on a primary production business on the property from XXXX 20XX to XXXX 20XX and XXXX 20XX to XXXX 20XX.

You continued to assist with the business during weekends and over the long summer breaks. You regularly discussed business matters and attended events together when purchasing new stock.

There were no formal agreements between either parties. The only condition on the use of the land was they were to maintain the property in good working order such as maintaining fences and spraying of weeds.

You did not receive any rent or lease payments for use of the property.

The partnership's aggregated turnover for the year ended 30 June 20XX is less than $2 million.

The total next value of your assets owned do not exceed $6 million just before the CGT event.

You were over 55 years of age when the property was sold.

The property was sold in XXXX 20XX for $XXXX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-15

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-40

Income Tax Assessment Act 1997 section 152-200

Income Tax Assessment Act 1997 section 152-300